The loans between people there almost since we use money as currency exchange, never better. In terms of conditions and paperwork, it is much easier for a friend or relative to leave us the money than to ask the bank, although it also has its disadvantages, since as you surely know, asking for money from friends or family is very uncomfortable, but in Sometimes, it is the only option we have left. Either way, loans between individuals are another way to get money to pay off debts or financing for a project, but are they a good alternative?
What are loans between individuals?
Loans between individuals are considered when an individual leaves money voluntarily and without intermediaries to another with the promise that it will be returned later. That is, if a friend or relative leaves you money as a favor, this is considered a loan between people.
Private loans are usually made between acquaintances, so the only guarantee that is needed is trust , since no type of contract is usually made or the amount to be returned with interest is increased. It is simply an agreement between people who agree to do their part, one to leave the money and the other to return it.
As there are no intermediaries, the only downside is that there is no validity against the law that this loan has been produced. Therefore, if either of the two parties does not comply with its obligations, we will not be able to claim as if it would occur with any financial entity. Some type of legal contract can be made, but it is not the usual, since loans between people are based on mutual trust.
What types of loans between people exist?
In addition to the usual loan between friends or family, there are other types of loans between people that you can go to in case no one you know can leave you the money you need. There are some different formulas that can be a good alternative in some cases:
- Private lenders: for a long time there have been people who have a business model based on leaving money to other people, whether they are known or unknown. In return, you will have to pay some interest, usually less than what a bank asks you for. In case you go to this type of loan, make sure to leave everything well tied before a notary so as not to have problems. We do not recommend that you use this method to borrow money.
- Crowlending: the digital revolution has brought to the world such interesting concepts as Crowlending. They are platforms that connect people who need money with others who want to lend it. In other words, these platforms act as an intermediary to ensure that both parties will fulfill their part. Crowlending is regulated by law, so it is totally legal and safe. It is a branch of Crowfunding where one or more people can get a small benefit from their savings leaving it to other people who need it. Lenders, in addition to receiving your money each month, receive annual or monthly interest.
Things to keep in mind when we ask for a private loan
There are many things that you have to take into account before requesting a particular loan, among which the following stand out:
- Type of particular loan: here we recommend that you ask for money from someone you trust as the first option. It is a bit of a bummer to ask friends or family for money, but your parents, siblings or even friends will be willing to help you if you need it. If that option is ruled out, we recommend crowlending, it is a good alternative.
- Amount : ask only for the money you really need, even if there are no or low interest rates, do not go into more debt than necessary. Remember that you are asking for that money for a very specific reason and it may be urgent, so always keep it in mind.
- Interest : in case you request your loan from a lender or by crowlending, make sure you get the lowest possible interest. Use logic, since interest is the price you have to pay for having money that you don’t have. Surely the urgency and the reason mark the interest you are willing to pay.
- Deadlines: whether you ask an acquaintance for money or use another method, you should be clear about the return deadlines. In the first case, you can return everything at once if it is a small amount or agree to return your money in several payments. In the second, surely you have a long repayment term, the larger it is, the more interest you will pay.
- Fees : the fee will depend directly on the return period. The longer it is, the lower the monthly fee and vice versa. Find the middle ground to get rid of debt as soon as possible and pay a fee that you can assume each month without problems. Do not get your fingers caught because then you may have problems paying monthly and therefore continue the same or worse than at the beginning.
Delays : If an acquaintance lends us money, we can amicably delay payments without too much consequence. However, in the other types of private loans you will have some type of surcharge if you pay later than it is due. Before requesting the loan, check that the conditions for delays are not abusive.